Q4 2022 Cutera Inc Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the Q Terra Inc. Fourth quarter 2022 results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
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The discussion today includes forward looking statements. These forward looking statements reflect management's current forecast or expectation of current aspects of the company's future business, including but not limited to any financial guidance provided for modeling purposes.
Forward looking statements are based on current information that is by its nature dynamic and subject to change.
Forward looking statements include among others statements regarding financial guidance and regulatory approvals.
Good activity improvements and plans to introduce new products and expand into additional geographies.
For words that you identify forward looking statements. We encourage you to refer to the safe Harbor statement in our press release earlier today.
All forward looking statements are subject to risks and uncertainties, including those risk factors described in the section entitled risk factors in our Form 10-K as filed with the Securities and Exchange Commission and updated in our Form 10-Q subsequently filed.
Tara also cautions you not to place undue reliance on forward looking statements, which speak only as of the date they are made.
She Terra undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances or to reflect the occurrence of anticipated unanticipated events.
Future results may differ materially from management's current expectations.
In addition, we will discuss non-GAAP financial measures, including results of then adjusted on the adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into keep terrorists ongoing results of operations, particularly when.
<unk> underlying results from period to period.
Please refer to the reconcile reconciliation of GAAP to non-GAAP measures in our earnings release.
These non-GAAP financial measures should be considered along with but not as alternatives to the operating performance measures prescribed by GAAP.
With that I would like to turn the conference over to Dave Mowry.
Ill kick Tara. Please go ahead.
Thank you operator.
Good afternoon, and welcome to the terrorists fourth quarter and full year 2022 earnings call. We are glad that you can join us for this update real Hunt's chef our Chief Financial Officer is joining me on today's call.
During the initial segment of the call I will provide you with our view on the fourth quarter 2022 performance as well as the underlying market fundamentals and other leading indicators of the health of our business.
Then pass the call to Ron who will provide you with greater detail on our financial results for both fourth quarter 2022 and full year 2022 periods as well as share our initial full year 'twenty twenty-three financial guidance.
Following ron's remarks, I will share our thoughts on the year ahead.
Financial contribution to the Avi clear product and the associated business transformation, we anticipate delivering over the course of 2023.
Following our prepared remarks, we will turn the call over to the operator, who will then open the call to your questions.
But that being said, let's dive right in.
As a starting point for the call I'd like to put our full year 2022 performance into perspective.
During 2022, our team delivered strong top line result, with our mid teens full year constant currency growth across the business with contributions coming from each geography in almost every product category.
Performance came in the face of macro economic pressures wavering consumer confidence and material foreign exchange headwinds.
Additionally, we successfully brought to market and scaled and innovative first mover energy based laser for the treatment of acne, which we believe increases our total addressable market by nearly two and a half fold.
The device is and will always be the first FDA approved device for the treatment of mild moderate and severe acne across all skin types.
Most critically the clinical outcomes and patient safety profile from the signature procedure are unmatched.
We remain convinced that this device will indeed change the way that dermatologists see and treat acne.
Finally, we were able to see the green shoots of the financial transformation, we intend to deliver through the novel I'll be clear business model.
By approaching the acne market with a unique placement based approach to all be clear we have established a true collaboration that tightly aligns our interests with those of our clinicians and practice owners.
In addition to the transformation of our customer relationships. We also expect I'll be clear to energize topline migration to recurring revenues the expansion of gross margins increased positive impact on EBITDA.
Greater linearity in our business and a significant change in the trajectory of cash generation for two tera.
I'll provide additional commentary on the army career program later in this discussion.
Turning now to fourth quarter 2022 performance, while revenue was lower than expected, we overachieve dharavi career placement expectations. Following its full north American launch announced in November of 2022.
Top line short fall in the period was driven by a miss on the North American core capital equipment sales and to a lesser extent North American core consumable product sales.
Both of which were directly impacted by the extent and volume of Avi clear activity in the period as key account managers focused on promoting placing and supporting the increased customer demand for Avi clear as previously disclosed we are utilizing the same sales force to place I'll be clear and sell our core capital equipment.
In fourth quarter 2020 to the North American capital team focused its efforts on driving I'll be clear bookings and perhaps over index. Some of their efforts following the full north American obviously, a launch strong underlying interest in RV clear quickly converted into customer demand that occupied our sales team throughout November .
And most of December the <unk>.
Than anticipated volume of deals diverted much attention away from routine processing of core capital deals and left a significantly shortened timeframe to close deals when sales reps finally pivoted back to their core capital pipeline.
Based upon our experience thus far with the obviously the launch we believe that these efforts spent prospecting in closing I'll be clear deals would've translated into advancing approximately 100 to 120 core capital deals, which we estimate to have resulted in roughly $4 million to $5 million of core capital revenue.
Some of which may still be recovered over the course of 2023.
We have already taken action to address the root cause of our capital revenue shortfall in fourth quarter 2022.
The underlying issues requiring attention our number one sales rep activity and monitoring and number two sales commission and incentive structures.
Following end of ear close activities, we went to work with the North American sales leadership team to understand these issues.
And this has in turn resulted in the construction and implementation of an uncapped compensation program that rewards sales performance when it achieves goals in both the core and I'll be clear segments.
Additionally, we have implemented activity tracking utilizing salesforce dot com application to help sales managers ensure that adequate time and attention are being applied by each rep across both segments.
While these repairs may seem obvious these are management oversight and they did not reflect upon the skills or capabilities of our North American sales force as you'll hear later in the discussion the level of Avi clear placements in the period confirms the quality and capabilities of this exceptional sales team.
Now with data in hand, we are actively reviewing the sales activity at senior levels within the organization with the goal of leveraging this information to improve our sales processes. Meanwhile, our sales managers are delivering a strong accountability message that effort must be applied across.
Both segments.
Additionally, our internal staff is scaling its support to ensure that the capital sales team can remain tightly focused on processing deals with their customers.
Before turning the call over to Ron I would like to share our view of the markets. As we look ahead to 'twenty to 'twenty three we believe that some macroeconomic headwinds are indeed present and that these will have an impact on our 'twenty 'twenty. Three result, Nevertheless, we believe that these changes will not be long lasting is underlying.
Feedback continues to highlight steady patient traffics. Additionally, our routine assessment of activity levels indicate well book practice schedules reinforcing our confidence in the continued resiliency that we have seen over the past six quarters.
With RV clear now in full launch we can leverage what we believe to be a more recession resistant process and procedure to place products into areas that may be more impacted by macroeconomic factors and then where do you expect to be able to leverage our core products bolstered by some new.
Product introductions in combination with IV clear to deliver above market performance for the business.
With that let me turn the call over to Ron to provide some additional color on our financial performance and our fiscal year 2023 outlook real hot.
Thank you Dave as I review in my prepared remarks, I want to note that I will be discussing some non-GAAP results a complete reconciliation of GAAP to non-GAAP is included in our earnings release.
Encourage listeners and readers to review our non-GAAP metrics in conjunction with the GAAP results as contained in this earnings release.
Total revenue for the fourth quarter was $67 4 million compared to $65 6 million for the same period in 2021, representing an increase of approximately 3% on an as reported basis.
During the quarter, we continued to face meaningful foreign currency headwinds and our constant currency revenue growth was approximately 10%.
Fourth quarter, North American capital equipment revenue of $25 million decreased by 13% over the prior year.
International capital equipment revenue for the fourth quarter was $17 4 million.
18% as reported and 27% in constant currency from the fourth quarter of course 21.
Recurring revenue defined as our consumables global service skincare and I'll be clear product lines was $24 9 million in the fourth quarter up 13% as reported and 29% in constant currency.
The increase over the prior year was largely driven by skincare revenue of $11 $8 million up 10% as reported and 37% in constant currency and the continued ramp of RV clear generating $3 $2 million in revenue for the fourth quarter. This growth was partially offset by decline in <unk>.
Consumable revenue, which came in at $4 $2 million down, 22% as reported and 18% on a constant currency basis, driven by a VIX your account onboarding activities diverting the attention of our sales team away from core promotional events.
Our service revenue grew slightly at 2% on a constant currency basis.
non-GAAP gross profit for the fourth quarter of fiscal 2020 two was $40 million.
With a gross margin of 59, 4%, representing an increase of 30 basis points compared to the same period last year.
Excluding a more than 210 basis point impact from foreign exchange headwinds the non-GAAP gross margin in the fourth quarter would have been 61, 5% and approximately 240 basis point improvement over the prior year. This was particularly impressive given the shortfall in North American capital revenue.
And highlights the transformation, but I'll be clear is bringing to our business.
Total non-GAAP operating expenses for the fourth quarter of a point breakthrough were $39 $7 million compared to $34 $5 million for the same period last year included within this number our $6 $7 million of expenses related to all of us here.
non-GAAP sales and marketing expenses for the fourth quarter of 'twenty, 'twenty, two where $26 million compared to $22 $2 million for the same period last year driven by continued expansion of our sales force higher commissions and increased travel.
non-GAAP R&D expenses for the fourth quarter of 2022 were $5 $5 million compared to $5 $6 million for the same period last year.
non-GAAP G&A expenses for the fourth quarter of 2022 were $8 $2 million compared to $6 $6 million in the same period last year driven by expansion of our head count.
And an increase in our bad debt reserve due to an increase in age receivables.
This was driven mainly by the same sales force distraction that impacted core capital equipment sales, we expect us to largely be addressed over the next couple of quarters.
For the fourth quarter. According to our non-GAAP operating income, which we referred to as adjusted EBITDA was zero point $2 million compared to $4 $3 million in the prior year Peter.
Largely driven by FX headwinds of more than $3 $4 million and costs associated with the full north American launch of all these here.
Finally, there were no material or significant changes to our tax position.
Turning now to our balance sheet.
We ended the quarter with $317 $2 million of cash and marketable securities compared to $258 million at the end of the third quarter driving the $66 $5 million sequential increase or 91 $4 million of net proceeds from our December convertible debt.
Days, partially offset by $24 $9 million of cash utilization, primarily driven by increased objects or deployment.
Before I turn the call back over to Dave I would like to provide you with our outlook for the full year of playing for entry.
We are issuing constant currency revenue guidance of 277 million to $292 million.
Flying 10% to 16% constant currency growth over the prior year.
At current foreign exchange rates, we expect to eclipse these headwinds exiting Q2 'twenty three.
We also expect adjusted EBITDA to be in the low single digit millions with consistent sequential improvement as we progress through 2023.
And we expect to continue to consume cash primarily in the first half of 2020 three as we continued to expand our Avi clear footprint in the North American market.
With a projected cash consumption of $55 million to $65 million greater than half of which will happen in Q1.
Q4, 2023 we expect to achieve cash flow breakeven.
As a reminder, our core but this historically is consumed cash in Q1 and Q2 up there with that I will now pass the call back over to Dave.
Thank you Ron.
As noted in our earnings release earlier today, I was especially pleased in the period to see broad product acceptance of the Avi cleared device as well as the corresponding customer demand, enabling us to accelerate obviously of placements, which exceeded 600 units for 2022.
Our team's relentless focus on leading with clinical results, providing increased support for practice adoption and ensuring the delivery of improved patient outcomes in less time with a reduced patient risk profile is indeed resonating within the dermatology market as well as with patients.
We expect to sustain a placement rate of 200 to 300, Avi clear devices per quarter and exit 'twenty twenty-three with greater than 1500, Avi clear devices in our active installed base.
As part of our 2023 I'll be clear plans, we intend to increase our efforts in driving utilization with each practice to date, we have been prioritizing our efforts on placements to fully leverage the first mover advantage, we created through the execution of our product development clinical and regulatory functions.
We also recognize that any incremental improvement in utilization applied across our growing install base will deliver a profound revenue and profitability impact in the long term and we have initiated a coordinated effort to drive patient traffic.
These efforts will build over the course of 2023 and 'twenty 'twenty four and include indication expansion continued procedure optimization, and then expanded patient outreach and awareness campaign.
The results of Avi clear placements and utilization ramp will ultimately lead to higher quality financial contributions the nature of these contributions well sustained improvements across key metrics such as an increased mix of recurring revenue.
Expanded gross margins increased adjusted EBITDA.
Greater linearity and visibility in our business and finally sustainable positive cash flow exiting 2023.
These desired state performance contributions and financial profile transformations are just around the corner as we continue to accelerate our RV clear program.
Now we will open the call to your questions operator.
Thank you well now begin the question and answer session. Just join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
You're using a speakerphone please pick up your handset before pressing any cues.
Call Me a question Press Star then two.
Our first question is from Jon Block with Stifel. Please go ahead.
Yeah.
Great guys. Thanks, good afternoon.
I'll start with North American capital.
<unk> 22, as you said it was difficult, they're making changes right you're all done in the sales force.
In incentives I think you have some new.
Capital products, but those are arguably later in the year. So I get that you don't like to give specific quarterly guidance, but considering those changes and again the new products that I don't think of <unk> can you just help us out a little bit you know directionally on the thoughts of the weeding specific to capital if you.
For 2020, we as much as many deals are you willing to provide middle as my follow up.
Yeah. Thanks, John .
And thank you for the question.
So I think that the way to be thinking about capital in the first quarter of 2020. Three is just like every other year. This is generally the seasonally low quarter for capital placements.
In sales and I think we would expect to see that again this quarter.
I think that some of the some of the deals that we maybe had in the pipeline may still continue to push through and we may see some artifact of those in first quarter, but I'm actually thinking those will probably bleed out mostly over the first half and not just the first quarter.
I do think that there is some degree of.
I'll say macroeconomic perceptions out there that have people hesitant slightly hesitant, but I don't see any any telltale signs that we think that patient spending will significantly be offered down in fact, our information continues to show good steady patient traffic as the majority of our customers.
We would expect the capital in 'twenty to 'twenty three would follow a very similar seasonality than we've seen historically.
Okay got.
Got it thanks for that very helpful and maybe just to pivot and my second question, but I'll be clear the system as a two to three months of a cold is helpful. But not sure if you want to comment.
The $30 million ish revenue number for all be clear for 2023.
And any thoughts just on cohort data, Dave I mean, I know these things take a little wallet away out, but you know approved in March and maybe if you look at the 160 systems or so that were placed as of.
At the end of September .
How are those ramping from a utilization perspective, how long does it take to really get these things up and running so really those two items the revenue number and anything from a cohort perspective that you're going to come at all thanks.
Yeah. Thanks, John I think first of all it's most important that listeners are aware that depending on where the device placed is placed and which type of practice does have some impact on the speed of uptake number one, but then secondarily on the sustainability of that volume.
What we have seen with med germs in particular is a much slower uptake upfront because of practice behaviors in a it's tough to kind of reengineer and rewire. The practice for something that doesn't take seven minutes, whereas I guess, they moved from room to room.
In diagnosis, so being able to accept that into the practice. It takes a little bit more work that being said, they're also very clinically driven and they want to see some results before they broadly adopt across their practice. So we've seen them slow to adopt so to change, but they have a lot of patients and they have the ability that once they get convinced.
Due to move to a more greater utilization in the longer term.
Contrast that with let's say the aesthetic journey. They may have a couple of patients right now and is willing to maybe be a little bit more aggressive in the placement and use of the device, but theyre not actively recruiting or sourcing patients for acne at quite the same rate that the med dermis. So we see them burning through some.
Patients and then having low periods.
I think each are very different but to answer your question. We certainly see that the aging of med germs in particular leads to higher utilization over an extended period of time, a couple of quarters and we see that the aesthetic germs once they get into the habit of recruiting and refilling.
If you will their their patient pool are they get to a establish run rate as well and those are both increasing over time.
I'm, sorry, just the $30 million number that I threw out but I'll be clear just any thoughts around that thanks.
I was conveniently avoiding that because we arent, giving I'll be clear financial guidance, but I think the number out in the street and I think you know we we understand what that number is and you know I don't think it is overwhelmingly scary to us. However, we know that we have our work cut.
That for us.
Yeah.
Thanks for the time guys.
Okay.
The next question is from Margaret Kaczor with William Blair. Please go ahead.
Hey, good afternoon, everyone and thanks for taking the question.
And I wanted to follow up maybe on the series of adjustments that you guys talk to both of them kind of about the capital side as well as on the Cam side, improving quality leads commission structure, because I thought so yeah. Yeah. When did those changes get into my dad. You know can you give us any sense or metrics, yeah, now that maybe you're a few weeks.
These changes whether you think it's having traction.
Or is it just going to take a little bit more time, given kind of the weight of capital sales in the last months of the court.
Well great.
Great. Thank you very much for the question I would start by just saying that theres two different elements that we have put in place. The first is an uncapped a commission structure that significantly weighted towards performing well in both the RV segment as well as the core.
Segment, and I think that's generally going to have an immediate impact and more dramatic effect on people's use of their time and how they apply themselves over the period.
So I think that's probably a little bit more of an immediate change in and probably get rolled out much more effectively in February as we had our national sales meeting.
So.
I think that that will have the desired effect on time and sharing time. The other element is actually monitoring time and attention of our sales reps. So that we can actually see what's the outcome and output of different processes are how many calls are taking harmony.
Meetings are setting up et cetera, et cetera, and the intent is not to micro manage reps, rather notice and identify patterns and coach better coach to best practice, if you will.
With that data and I think that's going to probably take a little bit more time to coalesce into process improvements and process changes. However, I think what we will see early is I'm just kind of from the Hawthorne effect over me.
You're looking at what's happening with their rep, they'll get probably a little bit more activity on certain areas that they wanted to cap focus so while I don't think we're going to see process improvements probably until really towards the end of this quarter. Early next quarter I do think we may see some increased focus and attention being spent.
Nonetheless.
Oh, okay.
That's helpful and and you know I guess just to follow up even further on that point, yeah. Obviously, we've seen a big increase in all the accounts that still increasing a lot. This year. So how do you think about the number of sales Rep channel Cams to make sure that these novel, New all the accounting and frankly need to tear accounts, having good experience yeah. I don't know if you can give it.
Neither in rough numbers are but you know the the number of touch points that some of these accounts end up having anything like that would be useful. Thank you.
Yeah, I think it's really interesting to talk about this.
Fundamentally we kind of outpaced ourselves in a little bit in the in the fourth quarter and early part of first quarter, but you'll notice that we're we're kind of laying in into in line a sustained rate of future placements. So this is not going to require us to add a significant amount of capital reps although.
We will always have a true.
A churn if you will for higher performers and better outcomes I think what you're going to see is it will require some investment and some of the back office operations and support for the field such as our field service Engineers are doing do installations. I think we will have to continue to scale. Our key account managers as we add.
New accounts and expand their roles.
But I think that's where you're going to see the investments I don't think you're going to see a significant amount of capital reps being added but I think you'll see a few added right in and will continue to expand with market growth.
But I do think there's going to be an opportunity to continue to add great people to the team and our intent will be to continue to upgrade the team and put the best players on the field.
Great. Thank you guys.
Alright.
Our next question is from Matt O'brien with Piper Sandler. Please go ahead.
Hi, This is Dan on for Matt I'm really just hoping you could help us with.
A little bit of guidance for the year now there's growth yeah, roughly 13% for 2023.
How much of that you anticipate would be from either clear.
Yeah.
Tomorrow I think.
Thanks for the question and I'm pleased to say, how the math for US I would say for the for the most of all we're not breaking that out right now we will be reporting by segment over the course of the year. So this will become more obvious as we kind of put more and more data out.
You know it would be a little bit premature for us to get too far in front of us in the quarter as we are kind of coming out of a fourth quarter, where we over index a little bit to Avi clear in some of the the hangover from that probably will have some early effect on this quarter. So we're shifting as we go and we'd really don't want to.
So the 70 lay out I'll be clear guidance as a standalone until we see the speed at which we can onboard these accounts and get them to a productive nature. So I'm I think we're going to we're going to hold back on that for the for the time being I do think that there's a lot of people that have put out notes regarding.
A little bit of malaise or overhang in the market regarding capital purchases due to interest rates and other things and I don't think we're gonna be inoculated from those items, but I do think ourselves people have a good pipeline.
And a line of sight to achieve their numbers are and they are certainly being able to deliver for us a very very successfully throughout 2022, and we anticipate that they'll be able to get back to that to that right. So without breaking apart I do think that we will see good performance from our team.
We will see continued growth of Avi clear as the installed base grows.
Yeah.
Great. Thank you.
Yeah.
The next question is from Greg Sellers with Stephens, Inc. Please go ahead.
Hey, this is a this is george.
I just wanted to maybe start with gross margins are that outperformed our expectations in the quarter. So I'm. Just curious you know what the puts and takes there were and maybe if this is a good.
The starting point for us to model as we think about the next few quarters and years.
Hey, George I knew as George by the way.
[laughter] listen I think it starts by just you know we tried to kind of hint towards this that we're seeing green shoots of the impact that we think will likely come from them.
And I think you see that you know as you look at our non-GAAP constant currency growth they've got to 61.5 gross margins and I think you know, there's probably a lot of people that probably remember us a year ago, saying you know that we thought we could get up into the sixties in I think in this kind of shows that that viability.
But maybe I can let rand speak specifically to the puts and takes that got us to those numbers. Yeah. Thanks, Dave. So I'd say you know in addition to the euro.
The mix of our high capital the biggest booked here simply was the omnicare being over $3 million in carrying some of those costs in the past couple of quarters and now we're getting to the revenue lift off that we've been planning for that.
And I think as you can choose to scale, so our P&L and margins and cash.
The overall financial health of this company.
Okay. That's that's really helpful and maybe switching gears here a little bit.
The the international systems, our revenue line put up another really strong quarter. So.
Could you just give us some color on what some of the drivers there are and are your expectations for for next year.
Before we get to that Dave just remind me maybe the biggest take over there obviously was FX.
And that's why there's a spread of almost 200 basis points between our non-GAAP margin at constant currency.
Margin was crested at 61%.
Hello, really awesome to see them.
Thanks, Thanks, Sean our internationally, you know and I think this speaks a little bit to the fact that you know we don't believe there to be significant macroeconomic pressures. We think that there are some present, we think some of these are probably more perceived and real and we do think that interest rates may be somewhat problematic.
In the U S temporarily those things being said, we saw a fairly decent performance in.
In both Japan.
And in our Intercontinental distribution markets.
Australia kind of held their own in Europe had kind of year over year growth as well, although it was somewhat stymied at the end of the year and and we expect more from Europe over the longer term.
It was quake actually compelling to see the performance in Japan in particular, knowing some of the challenges that they have gone through.
In terms of pricing and and local local economic environments. So I'd say capital was strong really in Japan, and intercontinental and probably at or above expectations in Australia and Europe .
Yeah.
Okay, great. Thank you all for the time this evening.
Yeah.
The next question is from Anthony Vendetti with Maxim Group. Please go ahead.
Okay, Yeah. Thanks, Dave.
So just a just a couple of follow up questions on I'll be clear. So so 600 total AR and in 2022 that were placed did you provide the number for the fourth quarter specifically.
I did not Anthony I didn't Wanna mixed apples and oranges frankly, you know we had talked about what the installed and active units were at the end of Q Q3 at 166, but what I wanted to do is get to a number that we can probably more ready.
Earlier report on with with accuracy being kind of the the placements which are indeed just shipment.
I'll tell you. This that you know we saw a little bit over 600.
Total placements in the year, but I think that that probably doesn't fully.
Fully disclosed the amount of demand and the customer interest that we continue to see which gave us great confidence in giving you. The the 200 to 300 per quarter coming through this year. So I would tell you that its been overwhelming and very very gratifying to see that kind of demand.
From our customer base.
Okay, and then the revenue generated from hobby clear.
Consistent with the treatment revenue ended device license fees was 3.2 million in the fourth quarter.
And during that quarter, there were $7 6 million in the clear spending is that correct.
Yeah, I think you know, we're we're kind of moving through a point, where the the the installed base is still small enough that it's not over over over earning if you will the amount of cost to place devices. I think we expect that to two crossover during 2023.
We've talked about being cash accretive exiting 'twenty three.
Cash create cash flow breakeven I think real hard said it and three Q 'twenty. Three is that is that the same thing for Avi clear where that probably clears maybe.
A little bit later than that in 'twenty three.
Yeah, what I said was cash flow breakeven.
Towards the end of all claims.
Go back and look at my script, specifically, but that guidance.
We'll continue.
And it has indeed, partially funded totally avi clear expenses that being said, we think that there's I'll be clear crosses over you'll see a kind of an accretive nature of of cash being generated even before I'll be clear totally crosses over but when it does cross.
Over that it will accelerate even faster through the through the course of the end of fourth quarter into 220.
'twenty 'twenty four yeah, yeah, exactly so just to clarify in my script I said by Q4 a 23.
Okay. Okay, Yeah, I wasn't sure if I got that right. So Q4, Okay and then.
Remind us what's in consumable product revenues.
I know what some of the stuff, but theres other things in there and that that fell off 18% in constant currency.
From the prior year is if so what do you what was the major.
Reason for that.
Yeah first of all I want to be very clear there is no I'll be clear revenue in our consumable product sales for core.
In that product is the consumable products associated with our true body.
A line of products, including true sculpt flex and to sculpt the I D as well as the chips that we sell are associated with the secret pro and the secret RF and finally are there are some considerable hand pieces that we distribute.
So just to be clear that's what's in there.
The lion's share of the Miss came in the in North America, though and like I said in my script that came as a result of kind of the number the vast number of accounts that we were trying to engage in onboard that were receiving there obviously a product.
With that many obviously placements of shipments you had a lot of customers getting product and we wanted to make sure that we were there to help them received the product and do the training. So the net result of that was we did fewer promotional events.
VIP nights or open houses at our practices, showing and demonstrating the true sculpt blacks or I D or secret product to the practices customer base and the net result is not doing as many promotions as we didn't sell as many consumables. So that's <unk>.
Having issue and a capacity issue that we've addressed and we're expecting that we'll get back on that horse here in the first quarter.
Okay, Great and then lastly on I.
I guess.
Clear.
Now another FDA approved product there out there.
How do you look at you know how the difference between I'll be clear in that product and do you feel like you. You know it is the goal is two to 300 placements per quarter.
And do you have the sales force in the key account managers and clinical support you need right now or do you have to incrementally add to that or significantly add to that before the end of 'twenty three and then I'll hop back well.
Let's take those in the order you offer them first of all there is another product that's coming to market that uses 17 26 nanometer nano meter wavelength laser and in some ways that is it serves as a validation of the technology. We have however, they they don't come close to.
Duplicating the rest of our procedure and I realize not rather not get into all the details there, but we're able to do this without anesthesia without any adjunctive pain therapy on a very routine basis and while there are always a subset a handful of people that may come.
Plane or B, just comforted that is you know less than a handful of those those hubs.
So there's a very different risk profile safety profile and even discomfort associated with this product that we have versus the competitive product so while.
While we see it to be a validation I don't know if I necessarily see it as a.
As a competitive device.
Number one and number two I, certainly think that the ancillary programs and things.
Things that we've developed around patient financing around the Avi cleared model that allows no down you know very low capital outlay of of expense.
For the for the midterm in particular and opportunity to give them a key account manager and support them.
And then now the loyalty program that allows them a cooperative marketing investment in their practice and to promote not only their practice, but also the device.
I think we've got a very broad a moat of opportunities and support functions that our competitors can offer.
Finally, finally, I guess I would say from a staffing perspective as I said earlier.
We have probably a need to continue to add our key account managers as we scale and add new accounts and broader customers well, but we do not necessarily need to add reps to our capital sales team to place. These devices since we've settled in on a number and a flat number if you will.
So how many we expect to place.
So I think we were good shape all the way around our staffing I think you'll see additional service and support investments over the course of the year as our installed base grows, but I don't think it'll be necessarily in capital sales team.
Okay, Great I'll hop back in the queue. Thanks.
Great.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Mr. Murray for any closing remarks.
Thank you operator, and thanks again for dialing in for our update we are very bullish for 2023 where they're focused evenly split between core business performance and Avi clearer acceleration. Our next update will come early may with our first quarter 2023 result, and we look forward to updating you then.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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